You are the Revenue Manager for a full service, globally branded hotel that is operated by a large independent management company. You have been in your role for approximately 3 years and over that time have learned much about the demand drivers into your market and about how both of your direct and indirect competitors in the market approach pricing and availability.
Today, you are preparing for your RevMax meeting and have been alerted by your revenue management system that the reservations velocity for a future Friday and Saturday night is accelerating – and reservations are being booked slightly faster than has been the case historically this far from arrival. In scanning your information sources for your local market, you see that the NFL has indicated they will likely have in-person games in 2021. The first game in your market is what is driving the more rapid booking pace. You need to recommend to your RevMax team a rate and channel availability strategy for not only this first date, but for all future game dates that are within the 18-month booking window.
You are currently 210 days out from the first NFL game driven demand dates.
You have options available to you in order to manage through both high and low demand dates.
- Modify the BAR rate. The revenue management system for the brand monitors all future dates and adjusts BAR automatically based on an algorithm that has proven successful in growing market share. You may modify the BAR rate manually on any given date, however that action is captured and monitored by the brand systems and compared to the algorithm generated rate. After the date of stay, your manager (VP of Revenue Management) receives a “report card” on how well your decision worked out. BAR rates on brand.com may not be fenced.
- Allocate or remove inventory to Opaque Channels. The channel booking cost is 20% and the discount rate recommended by the Opaque Channels is 50% of BAR.
- Allocate or remove inventory to OTA channels (your Franchisor has negotiated out of LRA agreements with all of the OTA channels – so you have full control over whether or not to allocate inventory to any of them. HOWEVER, in response to this, the largest of the OTAs have implemented a “partner scoring system” that causes your hotel listing on their site for ALL dates to move down on the listings if you remove inventory on any date. Basically, a punishment. Channel costs average 14%.
- Fence rates on OTA channels. Your franchisor has negotiated out of rate parity agreements, which means that in addition to charging a different rate on the OTA channels than you do on brand.com, you may also deploy fences. Fences may include any of the following: advance purchase, non-refundable, closed to arrival, and minimum length of stay.
- Deploy promotions through the OTA channels. You can modify value adds (parking, F&B discounts, etc.), boost listing position on the sites by offering an increased commission (typically 16%), or target travelers only from specific markets. If you do this, you MUST adjust your brand.com rate to maintain rate parity or you will be in violation of your franchise agreement and will be fined. You may also deploy fences to these discounted rates (see above)
- Push a Limited Time Offer through your “brand.com” loyalty program system. This notifies loyalty program guests of your offer on the brand.com app and website. There are currently no restrictions on how many LTO’s you may push – but research has indicated that the more frequently you do this, the less interest it draws from the program members. LTO’s may have fences deployed.
- Allocate or remove inventory to Airline package systems so that your hotel may be included in packages the Airline puts together. The rate you provide to the airline package system is not publicly available as the only price disclosed is for the entire package. There can be fair demand through this channel as your market is served by 5 major airlines, and their loyalty program members have learned that these packages often represent excellent total value. The channel booking cost is 10%. Package rates may not be fenced by the hotel. The airline can and does fence these packages when they determine they need to do so.
- Allocate or remove a transient leisure rate to your corporate customers who have agreements with your hotel/brand. These rates are made available on the corporate booking engines (and not available to anyone not using the corporate designated booking engine) and allow business travelers to extend their stays beyond their “business dates” and enjoy leisure time in your market. These rates are typically 15-20% discounts to BAR. The channel booking cost is the same as brand.com ($6.25 per reservation). These rates may not be fenced.
- Modify the discount for AAA, AARP and Military qualified rates. Your brand gives you the flexibility to increase the discount from 10% to 20% for any given date. As you do this, your listings are moved up on the AAA, AARP and Military booking sites for your market. These rates may not be fenced. The channel booking cost is the same as brand.com ($6.25 per reservation)
- Modify the Per Diem government rate on FEDROOMS for government employees. This rate is available only to qualified government employees but may be use for business or leisure. This rate is not publicly visible. These rates may not be fenced.
- Allocate or remove inventory to the “Friends and Family” rates for your brand and management company programs. For the brand, this rate is a standard 25% discount to BAR. For your management company, you have complete flexibility within a range established by your ownership. The channel booking cost is the same as brand.com ($6.25 per reservation). These rates may not be fenced.
- Allocate or remove inventory to a “First Responders” program established in your market by the local hotel association. This rate is available to local fire, ambulance, police and hospital employees or their families when available. All hotels in the market have committed to a 30% discount to BAR when this is offered. A special web site has been put up that allows these qualified guests to shop and book when available. The channel booking cost is the same as brand.com ($6.25 per reservation). These rates may not be fenced.
You are now 180 days (six months) out from the first NFL driven demand date. Based on your analysis of this date, it looks like the demand would take you to 60% occupancy.
In the form of a professionally written memo to your RevMax team, propose your recommendation on which of the available options you would select, and which you would close for this date – and when you would do so.
Simulation Timeline for September and October:
This week you will make decisions for the months of September in the first part of the week and for October in the latter part of the week. We will do this from now on through Week 15, on the same schedule.
In order that students have time to make decisions AND review the reports they will have access to once October “ends”, this is the schedule we will follow for each week.
Your instructor will notify you when the simulation has been run for August (sometime on Monday morning)
Access the simulation on Monday after you have been notified that August has been run and review your performance reports.
After you have assessed your performance for the prior month, adjust your strategy for the current month, and enter September decisions by Thursday at 11:59PM Eastern.
Your instructor will cycle the game on Thursday morning and let you know when you may review your reports and begin September decisions. DO NOT begin to make decisions for September until your Instructor notifies you that it is OK to do so.
After you have assessed your performance for the prior month, adjust your strategy for the current month , and enter October decisions by Sunday at 11:59PM Eastern.
Each student must post TWO entries to their Reflection Journal. This week, your posts will be about what you learned from August and September results, respectively. Journal posts are due by Sunday at 11:59PM Eastern.
Simulation Decision Sequence:
The following is the recommended decision sequence each team should be following. We highly recommend that your team responsibility be divided so that each of these decision areas is a focus of one team member, and that the work is evenly distributed each week.
Review the Information Tab to see if there is new information posted this month.
If there is an RFP, complete and submit your bid using the “communicate” function in the simulation by the end of the current month (either Wednesday or Sunday).
Review your historical reports, and use this information to develop changes to your strategies to improve your hotel’s performance.
Complete the rooms occupied forecast.
Complete and enter your rate decisions.
Complete your decisions about Refurbishment, Services, and Facilities. Remember that you may only spend whatever funds are available in the FFE Reserve. Funds are added to this reserve each month based on your total revenue from the previous month.
Complete your staffing, wage, and training decisions. Remember that your occupied rooms forecast must be completed and updated in the system BEFORE the staffing guide on the staffing tab will update.
Complete your decisions on marketing and advertising. Pay close attention to the Market Momentum and spend index numbers to help guide your strategy.